Global warming continues to have serious impacts on our planet, but the sad reality is that most humans tend to think in the short term. The result is that the price of heating your home or filling up your car is much more likely to change behavior than any big-picture threat like climate change.
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But with oil back up to $90 a barrel and geopolitical unrest and related sanctions on Russia roiling global energy markets, the economics of alternative energy are looking pretty good right now. That could help provide a lift to related companies — and the clean energy ETFs that own leading stocks in the space.
The following seven clean energy ETFs all have something to offer investors looking to play the current interest in the sector and put their money behind a greener economy in the long term:
| ETF | Expense Ratio | YTD Performance as of Sept. 19 close |
| iShares Global Clean Energy ETF (ticker: ICLN) | 0.41% | -21.5% |
| First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN) | 0.58% | -4.2% |
| Invesco Solar ETF (TAN) | 0.69% | -25.1% |
| First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index (GRID) | 0.58% | 12.7% |
| Invesco WilderHill Clean Energy ETF (PBW) | 0.66% | -10.1% |
| BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD) | 0.20% | 9.9% |
| ALPS Clean Energy ETF (ACES) | 0.55% | -11.6% |
iShares Global Clean Energy ETF (ICLN)
This iShares fund is the most liquid and well-established clean energy ETF out there. Formed back in 2008 when alternative energy wasn’t quite as popular, it has a long history for investors to dig into. It also is the biggest clean energy ETF by value, with more than $3 billion in assets under management. It holds all manner of clean energy stocks, including U.S. companies like solar leaders First Solar Inc. (FSLR) and Enphase Energy Inc. (ENPH) as well as Dutch wind turbine manufacturer Vestas Wind Systems A/S (VWS.DK) and Spanish utility company Iberdrola (IBE.ES) that is deep into clean energy technology with its operations. There are about 100 total holdings in this ETF from around the world, with just over 40% of all assets in the U.S.
First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN)
With a purely domestic focus, QCLN is another one of the most established alternative energy ETFs out there with more than $1 billion under management and about 60 total components. It’s got a lot of similar names when it comes to U.S. alternative energy companies like Enphase Energy. However, it also has a broader definition of clean energy as it includes electric vehicle firms such as the iconic Tesla Inc. (TSLA) and competitor Rivian Automotive Inc. (RIVN). The battery arms of these companies are indeed applicable to clean energy solutions beyond just EVs, so if you really want to play an ambitious vision of a green future then QCLN could be a way to invest in broader green technology applications.
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Invesco Solar ETF (TAN)
As the name of this $1 billion ETF should imply, TAN goes all-in on a narrow segment of the alternative energy market with a focus solely on solar energy. It has only about 40 stocks in its portfolio as a result, led by Enphase, First Solar and SolarEdge Technologies Inc. (SEDG). While almost 60% of assets are in U.S. corporations, it also includes a hefty dose of China stocks, which make up nearly 20% of the portfolio. Just be aware that this focus on a single sector means all the holdings live and die based on the conditions in that corner of the market — and in 2023, solar has been harder hit than other segments of clean energy and has driven down this fund more than 30% since Jan. 1. That kind of volatility is not uncommon with a focused play like TAN.
First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index (GRID)
Another interesting clean energy ETF with a bias toward a unique part of the sustainability equation is GRID, a roughly $1 billion fund focused on alternative energy infrastructure rather than companies that make EVs or solar panels. At first blush, top components may not sound as dynamic as the holdings of other clean energy ETFs, as they include Paris-based electrical component manufacturer Schneider Electric SE (SU.FR), multinational utility company National Grid PLC (NGG) and Swiss robotics and automation pioneer Abb Ltd. (ABBN.CH), among others. The fund is very international in nature, with less than half of the stocks domiciled in the U.S., giving it a diversified and unique approach to the future of clean energy systems worldwide.
Invesco WilderHill Clean Energy ETF (PBW)
Getting a bit smaller, the roughly $500 million Invesco WilderHill Clean Energy ETF is a mostly domestic fund with about 75% of assets in the U.S. and the rest spread across a smattering of international players from Canada to China to Brazil. It is definitely focused on alternative energy and clean technology startups, however. Case in point — its holdings at present include Archer Aviation Inc. (ACHR), which designs electric aircrafts that don’t use traditional jet fuel and XPeng Inc. (XPEV), which develops EVs in China. There’s a higher risk profile when you’re taking on aggressive and innovative positions like these, but PBW may have the long-term potential that many look for when seeking out clean energy ETFs.
BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD)
We’ve seen a lot of international stocks as part of the prior clean energy ETFs, but this roughly $500 million fund from investment giant BlackRock offers a completely different way to think about clean energy. Rather than give you exposure to solar companies or smart grid players, its stated mission is to invest in a broad group of traditional corporations “better positioned to benefit from the transition to a low-carbon economy.” This involves internal practices such as energy efficiency, water conservation and other practices. As a result, this ETF includes companies like Nestle SA (NESN.CH) that look to sustainably source ingredients for their products. It’s also important to note this is an “ex-U.S.” fund, meaning it willfully excludes domestic names to focus only on international players. It’s admittedly a very unique strategy and an indirect way to play clean energy, but one to consider if you want to invest only in companies part of the solution to a sustainable global economy — regardless of their sector.
ALPS Clean Energy ETF (ACES)
The smallest of the clean energy funds on this list, ACES is still more than $400 million in market value at present and offers a liquid way to play the sustainability megatrend. Taking a broad approach to the notion of clean energy, this ALPS ETF delivers exposure to a diverse set of U.S. and Canadian companies involved in the clean energy sector. That includes companies directly involved in renewables and clean technology, but also EV manufacturers like Tesla and upstart rival Rivian Automotive. Despite this wide reach across clean energy companies, it is also focused on a small list of around 40 holdings. Though less established than some of its peers on this list, ACES offers a unique and tactical play on this trend.
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7 Clean Energy ETFs to Buy Now originally appeared on usnews.com
Update 09/20/23: This story was previously published at an earlier date and has been updated with new information.
